The United States Internal Revenue Service (IRS) issued a statement on January 27, announcing the release of a new guidance document that answers common questions about electronic payments for tax refunds and other transactions in effect for this tax season.
IRS and other federal agencies are gradually transitioning government payments to electronic means in accordance with an executive order signed by President Trump on March 25 of last year. The affected payments include tax refunds, grants, welfare payments, as well as payments to suppliers or contractors. On the payment side to the government, entities such as individuals, businesses, state or local partners, and non-profit organizations are expected to make tax payments, penalties, fees, and other payments electronically.
Taxpayers will continue to file tax returns in the same way as before. The change affects the method of distributing refunds and making payments, not the preparation or submission of tax forms. The IRS stated that this change will be implemented starting from the 2026 tax season, while currently, they still accept checks and money orders.
According to the agency, compared to paper payment methods, electronic payments are typically faster, cheaper, and reduce the error rate. In certain circumstances, such as involving hardship or legal/procedural requirements, exemptions from electronic payment requirements may be considered.
The 7-page guidance document addresses various questions that the public may have regarding the implementation of the presidential order by the IRS. Taxpayers are advised to prepare in advance for the change by ensuring that their direct deposit information is updated when filing taxes. Those without a bank account may consider opening one as well.
The agency clarified that switching to electronic payments will not delay refunds; in most cases, taxpayers may actually receive refunds more quickly through electronic means. However, if a taxpayer does not provide direct deposit information and does not fall under the exemption for electronic payments, “their refund processing time may be extended.”
If bank information is missing when filing taxes, the tax forms will still be accepted and processed. For taxpayers with incomplete information, the IRS will send a letter to their most recent address on file, requesting updated bank information.
The IRS emphasized that they will never ask taxpayers to provide or update bank information over the phone or via text message, only contacting them through mail.
While the upcoming tax season will primarily distribute refunds through direct deposit to bank accounts, the executive order also acknowledges that not all taxpayers have access to traditional banking services. For such individuals, the IRS will allow alternative payment methods such as prepaid debit cards and mobile applications, and they may also qualify for the aforementioned exemptions.
Regarding payments to the IRS, the agency stated that they will continue to “temporarily” accept and process mailed payments, including cash, checks, and money orders; however, over time, they will fully transition to electronic methods. Currently available electronic payment methods for remitting payments to the IRS include debit or credit cards, electronic wallets, IRS online accounts, IRS Direct Pay, and the Electronic Federal Tax Payment System.
IRS Chief Executive Officer Frank J. Bisignano stated, “These common questions guide is designed to support the presidential order, helping to reduce fraud risks, improve security, lower costs, and make the IRS payment process faster and more reliable.”
The executive order issued in March of last year, titled “Modernizing Payments To and From America’s Bank Account,” sparked concerns about the federal government’s continued use of paper payment methods such as checks and money orders.
The order pointed out that paper payments lead to “unnecessary costs, delays, as well as risks of fraud, lost funds, theft, and inefficiency,” and further noted that the likelihood of Treasury check theft, loss, alteration, or undeliverability is 16 times higher compared to electronic fund transfers. The order mandated all executive departments and agencies to transition to digital payment solutions and take “all necessary measures” to assist recipients in registering for and utilizing electronic payment methods.
The 2026 tax season commenced on January 26 with a deadline set for April 15. The IRS expects to receive approximately 164 million individual income tax returns this year, with the majority being submitted electronically.